financialcounselor

High number of credit card debtors can’t recall how they accumulated their debt

In Uncategorized on March 21, 2013 at 1:43 am

That so many people can’t pinpoint where their charges went illustrates the dangers of credit cards

  Margaret from Illinois owed about $30,000 in credit card debt. She told me she’d had her credit card debt for years, but she couldn’t really pinpoint a time when it became unmanageable, or why it did so.  

“What originally caused you to consider filing for bankruptcy?” I asked.  

“Credit card debt,” she said in a flat voice.  

“What caused you to accumulate the credit card debt?”  

“We just needed them to pay bills to live.”  

“Was there a reduction in your income?”  

“No.”  

“Was there a big increase in some monthly expenses?”  

“No.”  

“Then how did you accumulate all that debt?”  

“I don’t know,” she said helplessly. 

  There are a great many clients just like Margaret who, when I ask how they ran up their credit card balances, really can’t explain it to me. It’s because they just don’t know how their credit card balances got so high. Usually, in a situation like this, the caller will tell me that he or she had carried and paid on credit card balances for years. The balances grew slowly but steadily, and then one day he or she suddenly had a tough time making a coming payment. And all of a sudden, they realize all their bills are a struggle to make. Hearing these stories, it’s as if the client is trying to remember a dream from the night before, but it only comes back in pieces.   What happens to a lot people who get into overwhelming credit card debt  is this: You first get the credit cards, and the terms are so easy and carefree. The average card only requires a minimum payment of about 2 to 4 percent of the outstanding balance. By accepting such ridiculously low payments, the credit card company can charge their high interest rates to whatever amount you don’t pay.  

Let’s say you sign up for a credit card and you go out the first month and ring up $1,000 in charges. The bill comes and the minimum payment is $20 (2 percent of the balance).   If you only pay that minimum amount, the high interest rate gets applied to the other $980 as you go forward. That’s where their huge profits come from. The credit card companies make their enormous profits when you don’t pay your bill. 

Numbers Never Lie

In Uncategorized on March 5, 2013 at 12:02 am

At my credit counseling agency, we preach the gospel of keeping a budget.

You may have heard the joke,
Keeping a budget is just going broke according to a schedule.

And it’s funny because it can be true. That’s the beauty of a budget. If you’re going broke, it will tell you by how much. If you’ve got $1,000 saved, and you put together your budget and find you are overspending by $200 a month, you’ll be out of money in five months. In this case, it really is a schedule for going broke.
Your budget will tell you the whole story. If you have financial problems, and you can’t figure out where you’re going wrong, your budget will show you. That’s because numbers will never lie. It’s just income minus expenses. We always advise our clients to keep a budget. That is our gospel, and we preach it loudly.
In reality, a budget is just a simple financial statement common to every single business that ever existed. It’s the same thing a business uses to compute its profit or loss in a month, quarter, year, etc. In business it’s called an income statement or a profit/loss statement. But it’s just income minus expenses. Granted, a person or a family’s income statement will be much simpler than that of a business, but it’s the same idea.
In fact, I advise my clients they think of their household finances from a business standpoint. I’m not telling them to view their family as a business, just to view their finances like a business owner would. The sales a business generates are its income. Just like your wages are your income. And all the expenses associated with operating a business amount to its cost of doing business. For a person or family, it’s the cost of living.  The same way a business needs to know where all of its money is going, a person needs to know too. That’s why if you don’t know the cause of your money problems, the budget will show you. The cause is found in the numbers. f
Income minus expenses. You can’t get much simpler than that. And numbers do not lie. I must repeat that line to my clients about twenty times a day.

If Wells Fargo doesn’t want my house, why are they moving so fast to take it?

In Uncategorized on January 27, 2013 at 8:15 pm
One Wells Fargo Center – Charlotte, North Caro...

One Wells Fargo Center – Charlotte, North Carolina, will succeed as Headquarters for East Coast Operations of Wells Fargo (Photo credit: Wikipedia)

Although borrower is approved for ample social security benefits, lender won’t hold off on foreclosing.

Today I had a client who wanted to bang his head against a wall. His name is Will, and he is three months behind on his mortgage. This poor guy had fallen ill this past year, went into the hospital and then was laid off. When his employer called to tell him not to come back to his job, Will filed for unemployment benefits. Being 63 years old, he decided to retire and so he also filed for social security. He was told by these different agencies that he would qualify for all three benefits. With his pension, the total income would be $3,900 per month. His house payment was only $750, and once those benefits kicked in, he would easily be able to resume making his mortgage payments.
But Will wasn’t paid while off work, and he fell behind on his mortgage. Wells Fargo had already sent him a notice of intent to foreclose.
The problem was that Will would not begin to receive the benefit money for at least a few months. But, Will did have the award letters verifying the amount of money he would be getting, and so he could prove what his income would be in the near future.
Now, I always hear spokespeople in the mortgage business say that lenders do not want to foreclose on anyone, and only do so as a last resort. So you would think that a mortgage lender would be willing to work with a person who can prove that their income will be going up to a level where they can afford to again pay their debt.
We called Wells Fargo to see if they would be reasonable. They wouldn’t.
We were told that even though Will could provide a copy of his awards letter, proving how much he would receive in income, Wells Fargo might decide at any time to begin foreclosure proceedings.
“Sir, the mortgage companies say repeatedly that they have far too many foreclosed properties and that they don’t want to take anybody’s home,” I said. “I hear and read that all the time. If that’s true, just give him time to start getting his money. If he doesn’t start making his payments then go ahead and do what you have to do. But he was told he’d be getting four grand a month, and he’ll be able to repay the missed payments. Why can’t you just hold off foreclosure for two months?”
“Sorry sir, but there’s nothing we can do unless he makes his payments,” he said, sounding like a robot.

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